Posts Explore New Models as Mail Mix Changes

One doesn’t have to search the latest newsfeed long to find a variety of reports on how posts are exploring new business models – or how they are faring under models already implemented – as a result of how the mail/parcels mix is changing with the growth of ecommerce and decline in letters. Japan Post this week was reported to be booking its first net loss since its privatization in 2007, Brazil’s post today started a national strike to protest reforms and the “threat” of privatization, the UK’s Royal Mail workers are threatening strike over plans to close its pension scheme, Kazakhstan is looking at selling off its postal service in 2020, and those are just a few of this week’s news articles on posts and the changes they are experiencing…

Elmar Toime, Chairman of the Postea Group, at the recent PostalVision 2020/7.0 event facilitated a panel discussion between two foreign post leaders on how their business models have evolved and the Universal Postal Union (UPU) on its plans going forward.

Toime gave an overview of all the different models that have evolved for posts around the globe, ranging from countries where the entire postal network has been sold off, to those where posts are owned by banks, those with separate retail networks, to those with company-owned post offices, to those where the post owns a subset of post offices with the rest owned by private entities. Toime said that the model where the post office is co-located with delivery operations – like the USPS – is becoming increasingly rare.

“What is driving these changes?” Toime asked rhetorically at the PostalVision event. He noted that postal banking has reinvigorated those sectors where traditional mail volume models are declining. In other areas, there are cost pressures to move to an agency-franchise model, and in many places there is increasing community and political recognition that the post office network is part of the country’s infrastructure and defines a community in some places.

“In its traditional form, and in the absence of financial services,” Toime said, “it is hard to see how post networks can be commercially self-sustaining.” He noted this can be different in developing countries where the post can play the part of government and ecommerce support. Toime said the future of posts and financial services often becomes a political play vs. a business one. [Check out the Postal Hub Podcast interview with Ian Kerr and Elmar Toime!]

The Post as a Government Services Interface

Khalil Daoud, CEO of LibanPost, told the PostalVision 2020/7.0 audience that Lebanon is a small country, about half the size of New Jersey, and that LibanPost started its journey 15 years ago after the country was devastated by war and had no postal services. Delivery began by having courier companies long before postal services, Daoud said, so the environment was competitive before the post was created, and LibanPost remains one of the few private postal operators in the world.

Daoud said LibanPost has had to diversify into other services to support its core postal service. “We thought if perhaps our company could play a role of interface between what citizens need and what the government has to offer, we could make some money along the way,” he told the PostalVision crowd. He said LibanPost worked with one government organization after another in a long process of convincing people of the need to change. He said it typically takes 12-18 months to move from one public institution to another, starting with process mapping to document procedures then challenge those procedures and identify ways to streamline or reduce steps, then shorten the processes and transmit some into the digital environment.

“At the end of the day,” Daoud said, “we end up becoming the front office for that government agency.” “Our role is not to renew passports or driver’s licenses,” he said, “but to be the interface between the agency and consumers.” He said that for clients, the benefits are tremendous because consumers can go to one place that offers all the services. Daoud said 35% of LibanPost offices are located in shopping malls or supermarkets, open 7 days a week, with call centers and online capabilities so customers can upload information online and send documents through the post. For the public administrations, their employees can focus on their fundamental responsibilities, brining greater efficiency for the government.

“Anyone can do this,” Daoud told the PostalVision attendees, “it is simply a state of mind where post offices act as the intermediary.” [Check out the Postal Hub Podcast interview with Ian Kerr and Khalil Daoud on Liban Post’s Transformation]

Building a Model for the Future

Syeda Naila Batool, Divisional Superintendent of Pakistan Post told the PostalVision group that the post faces a long list of challenges, including the threat of market liberalization and privatization, private entrepreneurs, new customer expectations, and lack of incentives.

Pakistan Post is a government department operating within a limited budget with any revenue going back to the treasury, Batool said, and providing jobs to 47,000 employees. It has both financial services and agency functions, providing a savings bank and earning 75% of its revenue from financial services and agency functions. It also provides postal life insurance, collection of utility bills, collection of taxes, and renewal of arms and driving licenses.

Batool said the post plays an important role in the mobilization of Pakistan’s national savings in that it provides banking services for the unbanked population of the country.

Pakistan Post wants to focus its energy not on “fighting the old,” but on “building the new,” Batool said, by sharing global experiences to reinvigorate the post, harnessing technology and collaborating with the private sector to win back credibility. Recently approved reforms aim to re-brand the post and change its look and feel in collaboration with the private sector.

Batool told the PostalVision crowd, “post is not yet dead,” and said that although challenges are enormous, there is a need to keep people connected and the role of the post can’t be replaced. “Our strategy is not a revival of the past,” she said, “but a compatible future of connected human relationships.” She said the post wants to develop a blend of technology, efficiency, and financial viability to integrated communities across the globe.

A UPU for the Future

Wendy Eitan, the Product Strategy, Integration and Economics Coordinator for the Universal Postal Union (UPU), outlined for the PostalVision crowd how the UPU operates and its proposals for reform currently being discussed.

The UPU is an inter-governmental organization with 192 member countries and it currently meets every four years at the UPU Congress, which is where decisions organizing the postal network are made. The UPU Congress was held in fall of 2016 in Istanbul, and Eitan outlined the three main goals from the Istanbul World Strategy for the UPU: improving the interoperability of the network infrastructure, ensuring sustainable and modern products, and fostering market and sector functioning.

Eitan also briefly outlined the UPU reform proposals which have been put forward to help promote efficiency and speed up decision-making at the UPU, which she acknowledged is not known as the fastest decision-making organization. “There is a case for change and a need to be better organized to meet market requirements,” she said. There is a proposal to change the UPU from its existing two council administration into one council with two commissions – one to run the regulatory side and one to run the post side. Eitan said this proposal is being hotly debated with no consensus yet reached, and the reform proposals has been sent back for study. The proposed changes also would result in two council meetings a year vs. one, and reduce the meeting time. In order to finalize the reform, an Extraordinary Congress will be held in 2018.

Eitan also gave an overview of the main focus topics from the recent UPU Congress, which include the Integrated Product Plan (IPP) and terminal dues (see PostalVision’s Cross-Border ecommerce panel article for more information on these issues).